EUR/USD April 22 – Hugging 1.38 in Quiet Trade

EUR/USD  is steady on Tuesday, trading close to the 1.38 line in the European session. The pair is not showing much movement as the European markets return to action following a long Easter holiday. On the release front, Consumer Confidence is the sole Eurozone event. Today’s major US release is Existing Home Sales. The indicator has been losing ground, and the downward trend is expected to continue in the upcoming release.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• EUR/USD crossed the 1.38 line late in the Asian session. The pair is unchanged in European trading.

Current range: 1.3800 to 1.3830

Further levels in both directions:  

 

• Below: 1.38, 1.3740, 1.37, 1.3650 and 1.3580.
• Above: 1.3830, 1.3895, 1.3964 and 1.40.
• 1.38 remains a fluid line. It is providing weak support.
• On the upside, 1.3830 has not been broken yet.

EUR/USD Fundamentals

• 13:00 US HPI. Exp. 0.6%.
• 14:00  Eurozone  Consumer Confidence. Exp. -9 points.
• 14:00 US Existing Home Sales. Exp. 4.57M.
•  14:00 US Richmond Manufacturing Index. Exp. 0 points.

*All times are GMT

For more events and lines, see the  Euro to dollar forecast.

EUR/USD Sentiment

• Eurozone lack of inflation a sore spot: There doesn’t appear to be an end in site for persistently weak inflation numbers in the Eurozone. German PPI posted a decline of -0.3%, its worst showing since December 2012.  Final inflation data for March came out slightly lower than expected. While headline inflation was confirmed at 0.5%, the lowest since 2009,  core inflation was downgraded to 0.7%,  matching the low level seen in late 2013, which was the post crisis low. The ECB has downplayed the danger of deflation, but Mario Draghi may have to abandon this “head in the sand” approach, which is weighing  heavily  on the Eurozone  economy.
• US inflation rises: The Eurozone is having a tough time with a lack of inflation, but in the US, it’s a different story.  US core inflation actually rose to 1.7%, exactly in Goldilocks territory: there is no deflation danger and quite far from heating inflation, despite a bloated balance sheet at the Federal Reserve.
• Is the US enjoying a spring bounce?:  Recent job figures have been OK  and  retail sales exceeded expectations. However, the  markets are not 100% convinced that the US is bouncing back after the harsh winter. An outstanding reading from the Philly Fed Index, has added to the hopes of a serious spring bounce. Meanwhile, the US housing sector has been struggling lately. We’ll get a look at
• Ukraine crisis escalates:  The markets haven’t reacted to events in Ukraine so far, but that could change if the violence in the east of the country worsens. Putin has threatened to act on his “right” to invade Ukraine, and has also given the country  an ultimatum regarding its gas debt. The gas supply from Russia to western Europe is in danger,  and  if the situation spills out of control, we could see  a sharp response from the markets.

More:  Forex Markets Likely to Goad ECB into Action